Staying fresh is talked about more often when shipping food products, but for Essex Brownell – which distributes electrical transformer and motor components – it is an acronym for the type of service the company is striving to offer. “We are really focused on our ‘fresh’ acronym that captures what we are trying to do – fast, reliable, efficient, sophisticated and honest,” Vice President and General Manager Hank Pennington declares.
“We’re trying to combine the benefits of being large with a national scale with some of the benefits of being local and fast,” he continues. “So our advantage over the small guys is that by being large, we have the ability to support a customer wherever they may be located, which makes a lot of sense for repeat customers with multiple locations. We have the broadest product line in the industry. We can supply all the needs they have for repair or manufacturing distribution, and we have the benefits of scale that leads to a better cost position with our suppliers than the regional guys would have.”
Essex Brownell distributes magnet wire, insulation, varnish, tapes, motors and related products used in the manufacture and repair of electrical transformers, motors and equipment. It also fabricates components for these products through its Essex Active fabrication services. Approximately three-quarters of its business is to OEMs, from the largest multinational manufacturers to small repair facilities. “I run all facets of the distribution business, including sales and marketing, the warehouse and network,” Pennington says.
The company distributes electrical components and products throughout the United States. Approximately 10 percent of its business is to Mexico and 5 percent to Canada. “We also touch Central and South America and the Caribbean a bit,” Pennington says.
Essex Brownell uses a hub and spoke network to handle its 21 locations. Its main distribution center and one of its fabrication plants occupies approximately 300,000 square feet at its headquarters in Fort Wayne, Ind. The other fabrication plant is in Torreon, Mexico. Regional hubs are in Philadelphia and Ontario, Calif., each of which is approximately 50,000 square feet. The remaining locations are branch offices. It contracts with trucking companies to ship its products to customers.
Essex Brownell uses enterprise resource planning and customer relationship management software to keep its performance high. “On any given week, 70 to 80 percent of our orders will be shipped out the same day,” Pennington maintains. “We have achieved over the last couple years 97 percent on-time delivery performance against customer expectations while at the same time reducing internal handoffs by 40 percent. That’s really been through a combination of process improvements and technical improvements across the business to be able to respond faster to the customer, which is going to make us win. On the Essex Active fabrication side of the business, we’ve reduced lead-times by 50 percent for most of the key product lines in the business.”
The company also is reducing freight costs with its new transportation management system. “We track freight costs by customer and by SKU essentially across all of our deliveries,” Pennington notes. “We’re tying that freight cost ultimately into the profit margin for each product and line. We’re looking to minimize cost and maximize the recovery we get on that freight. For a business like ours, we’re often charging freight back to the customer to minimize the cost between the two.”
Essex Brownell has hired a demand planner. “We’ve beefed up our demand forecasting resources so we can be better at forecasting local needs,” Pennington says. “The more you can consolidate inventory, the less you’ll pay in inventory carrying cost and in freight.” He estimates the company’s inventory averages five turns annually.
The company also is working to reduce internal handoffs in which customers are passed from department to department when seeking technical information or a quote for an order. “Because we’re taking so many calls across such a diverse customer base with so many suppliers, it’s easy to pass a customer with a question to two or four departments between pricing and marketing and different sales functions,” Pennington concedes. “What we’ve tried to do is put the right information in the hands of the right people.”
Usually, this is in the hands of one of the company’s 40 inside sales representatives in one of the company’s sales offices in Fort Wayne, Denver, Memphis, Philadelphia or Tempe, Ariz. With the company’s advanced phone capabilities, customers can be transferred across the company’s entire network.
With 200 suppliers and 5,000 customers in every industrial end market, Essex Brownell has been using its software to examine value-based pricing. “It has been very instructive for us this year to go through a process of breaking down that ultimate profit margin by customer, product line, supplier and market segment to look at places where sometimes we’re probably not charging enough for the service we’re offering, and at other times we’re charging too much,” Pennington says.
“What we’re trying to do as an organization is get to the place where we’re charging customers for the services and products that they want,” he continues. “We’re trying to match that service to the price and do that in a way that ultimately is fair and transparent and mutually beneficial. Our big push going forward is to take that value-based methodology and put it in the hands of people who are quoting on the spot. We’re matching price to value.”
The speed of quotes is how Essex Brownell measures the effectiveness of its efforts. “If we can respond within that same day as opposed to pushing that to two days, then our win rate goes up on the order of 30 percent,” Pennington maintains.